Robust Junk Bond Market Questions 'Great Rotation'

Despite talk of the so-called "great rotation" out of bonds and into equities, activity in the high yield debt market has been robust, with issuances climbing to a quarterly record high in the January to March period.

Global high yield bond issuances reached $148.6 billion in the first quarter - 25 percent higher from the same period a year earlier - led by the U.S. U.K. and China, according to data provider Dealogic.

High-yield debt, also known as junk bonds, are fixed-income instruments with a rating of 'BB' or lower by Standard & Poor's, or 'Ba' or below by Moody's, and have a greater risk of default compared to safer investment-grade bonds.

"There's an ongoing bid for junk bonds because people are searching for yield; that demand is going to continue. There isn't that much supply [of high yield debt] out there," Stephen Nash, director of strategy and market development with bond broker FIIG Securities told CNBC.

"While the spread has narrowed between junk and investment grade bonds, which is a concern, people are happy to go into something that has some of type of security," he added.

Heavy inflows into funds purchasing these securities has led to a considerable narrowing in the spread between the yield on junk bonds and U.S. Treasurys over the past year. The yield on the benchmark 10-year Treasury note stands at 1.83 percent.

"As people rush into the space, selection analysis tends to become a bit relaxed. Which later on can hurt them," she said.

In addition, from a valuation perspective, the junk bond market in Asia as a whole looks slightly overvalued, Yadav said, adding there is not much upside from current levels.

"If I'm a long term investor, with a one and half to two year horizon, I wouldn't be investing in half these names. If my time horizon is 6 months, it looks ok as there is an imbalance between supply and demand," she said.

Great Rotation

According to Yadav, expectations for a seismic shift to equities from bonds are overblown. What is more likely is that money will shift out of cash into stocks, she said.